As expected

La Doria 7 June 2017 Outlook
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La Doria

As expected

Q117 results

Food & beverages

7 June 2017

Price

€10.79

Market cap

€334m

Net debt (€m) at March 2017

88.3

Shares in issue

31.0m

Free float

37%

Code

LD

Primary exchange

Borsa Italia (STAR)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(4.3)

25.0

(10.7)

Rel (local)

(1.5)

15.7

(24.9)

52-week high/low

€12.4

€7.1

€7.09

Business description

La Doria is the leading manufacturer of private-label preserved vegetables and fruit for the Italian (20% of revenues) and international (80% of revenues) market. It enjoys leading market share positions across its product ranges in the UK, Italy, Germany and Australia.

Next events

AGM

16 June 2017

H117 results

19 September 2017

Q317 results

14 November 2017

Analysts

Sara Welford

+44 (0)20 3077 5700

Paul Hickman

+44 (0)20 3681 2501

La Doria is a research client of Edison Investment Research Limited

Following tough tomato campaigns in 2015 and 2016, La Doria management has delivered another quarter of results in line with expectations. The overarching strategy of shifting the production mix towards non-seasonal, value-added products with higher operating margins and lower volatility remains in place, and some recovery should come through from Q4 this year. The shares continue to trade at a significant P/E discount to their peers, and our DCF value of €12.49 (from €12.59) suggests 16% upside to the share price.

Year
end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/15

748.3

57.4

144.6

28.0

7.5

2.6

12/16

653.1

37.3

108.8

18.0

9.9

1.7

12/17e

643.3

32.7

78.1

17.0

13.8

1.6

12/18e

681.9

42.1

99.1

24.0

10.9

2.2

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Weak Q117 results, as anticipated

Consolidated sales of €167.5m were down 0.4% on Q116. As expected, there was significant deflation in tomato product sales prices following the tough negotiations during the 2016 campaign, which was characterised by adverse weather conditions, and some smaller players that depressed market prices to reduce their stocks and gain market share in the more price-sensitive geographies. There was a substantial increase in volume across the board, but unfortunately this was insufficient to counter the drop in pricing. The drop in pricing also affected the vegetable and sauces lines. EBITDA came in at €11.8m, which was down 20% on last year, with margins down 160bp. Price deflation is expected to continue into Q2 and Q3, reflecting the results of the 2016 campaign. Q4 will depend on the 2017 tomato campaign, for which the fundamentals seem promising.

The right strategy

The management has been working towards reducing the group’s exposure to the tomato line, which can be volatile and highly seasonal. The company is growing the sauces business, which is inherently more stable and commands a higher margin, and also the vegetable line. The tomato business, however, will continue to be an important segment in the group and the 2017 tomato campaign will depend on various factors, not least the quality of the crop. Sector de-stocking and lower forecast production bode well for the 2017 campaign. The target to stabilise overall group margin remains sensible given the challenging operating environment.

Valuation: Remains attractive

Our forecasts are unchanged and our DCF model points to a fair value of €12.49 per share, 16% upside from current levels. La Doria now trades on 13.8x 2017e P/E and 9.9x 2017e EV/EBITDA, at c 30% and c 2.5% respective discounts to its private-label peer group. The outcome of the 2017 seasonal campaigns is still unknown, although current indications are positive, but success here would provide a catalyst for the shares.

Investment summary

Company description: Strength in private label

Through the parent company, La Doria SpA, and its 98.7% holding in Eugea Mediterranea, La Doria Group is a leading private-label (PL) processor and manufacturer of tomatoes (red line), sauces, pulses and fruit-based products. Given the background of stagnating European consumption and structural volatility in the red line, La Doria’s overarching strategic objective is to change the product mix towards higher added-value and hence higher-margin products, and grow its market share in the PL segment, and in new markets. La Doria also owns 58.0% of its UK subsidiary LDH (La Doria) Ltd (LDH), which distributes both its own products and other PL products mainly manufactured by LDH’s minority shareholders.

La Doria was founded in 1954 by the Ferraioli family. The family maintains active management of the company. Antonio Ferraioli is group CEO and with Andrea and Iolanda Ferraioli and Enzo Lamberti the family fills four of the eight board positions and owns 63% of the group’s share capital.

Valuation: Material upside despite strong run

Based on our forecasts, we calculate a DCF-based fair value of €12.49, or 16% upside. The key sensitivities to our forecasts and valuation are outlined below. For 2017, pricing for the tomato, vegetable and fruit lines is complete and costs are fully calculated, as the seasonal campaigns are over and the annual pricing rounds have occurred. In the longer term, the balance of supply and demand for Italian tomatoes has improved through changes in legislation and sector consolidation, with demand fuelled by the growing consumer preference for PL over branded products, and international demand for healthy ingredients of Italian origin. The outcome of the 2017 seasonal campaigns is still unknown, but success here would provide a catalyst for the shares.

As further support to our DCF valuation, we look at La Doria’s key metrics versus the peer group. At 13.8x 2017e P/E and 9.9x 2017e EV/EBITDA, it trades at c 30% and c 2.5% discounts, respectively, to its peers.

Q117 financials: Still experiencing weakness from the 2016 tomato campaign

Consolidated sales of €167.5m were in line with Q116 sales of €168.3m. Organic growth was 5.6%, and the currency impact was -6.0%. EBITDA of €11.8m was 20% below last year, with margins down 160bp. The deflationary environment in Europe has been unhelpful, and Brexit has caused a weakening of sterling and hence a temporary loss of competitiveness for La Doria in certain categories, such as pulses and ready-made soups, where the competition has local production and hence lower costs. We expect Q2 and Q3 to witness similar trends and it will only be in Q4 that the results of the 2017 tomato campaign will start to come through. It is early days (the campaign runs from July to September), but the industry forecast is for production to be 5.0m tonnes (-4% vs 2016). We note that our group forecasts are broadly in line with the company’s targets.

Sensitivities: Improved visibility results in lower volatility

La Doria’s key sensitivities include:

input cost inflation on the agricultural commodities it processes to manufacture its products;

the supply/demand balance affecting the achievability of finished goods price inflation (particularly for the red line);

consumer consumption patterns and competitive pressures; and

FX, specifically euro/sterling due to the consolidation of its trading subsidiary LDH.

Company description: private-label ambient food

La Doria is the leading Italian producer of tomato-based products, including chopped, peeled, passata and other, and processed pulses and vegetables for the domestic Italian and international markets. It is the largest producer of private-label, ready-made sauces. It is the second-largest producer of fruit juices and beverages in the Italian market. Exhibits 1 and 2 below break down revenues by category and by geography. In FY16, 22% of revenue was Italian and 78% international. Its largest market by far is the UK (c 50% revenues), gained through its subsidiary LDH.

Exhibit 1: Group revenue split by category (FY16)

Exhibit 2: Group revenue split by geography (FY16)

Source: La Doria data

Source: La Doria data

Exhibit 1: Group revenue split by category (FY16)

Source: La Doria data

Exhibit 2: Group revenue split by geography (FY16)

Source: La Doria data

Approximately 95% revenues are for the PL segment, with La Doria serving a wide customer base mostly within the pan-European food retail sector, including Tesco (its largest customer), Sainsbury’s, Carrefour, Auchan, Selex, Conad, Waitrose, and many others.

With leading market share positions in its largest markets (the UK and Italy), and some of its other markets (Germany, Japan and Australia), as well as across many of its product categories, La Doria is well placed to benefit from the increasing consumer preference for high-quality, private-label products over branded products. In addition, demand for Italian products in some smaller markets is driving revenue growth in these regions well into double digits. Both factors provide a strong structural growth outlook.

The acquisition of Pa.fi.al at the end of 2014 was strategically significant. In line with management’s plan, it further shifted the production mix of the group towards non-seasonal, value-added products. Ready-made sauces have higher operating margins and lower volatility than tinned tomatoes. In addition, the acquisition should help drive growth in countries where La Doria was historically under-represented, such as the US.


Rolling three-year plan: no changes

La Doria outlines its financial targets and strategic business plan for a rolling three-year period, usually at the beginning of each financial year. The financial targets outlined in March 2017 were very similar to those set out in September 2016, as shown in Exhibit 3 below.

Exhibit 3: Current vs prior financial targets (2017-18e)

2017e

2018e

€m

Old

New

% change

Old

New

% change

Revenue

661.0

644.0

-2.6%

702.0

690.2

-1.7%

EBITDA

50.0

48.0

-4.0%

61.0

59.2

-3.0%

EBIT

37.2

34.9

-6.2%

48.2

46.4

-3.7%

PBT

34.4

33.1

-3.8%

45.7

43.0

-5.9%

Net profit (pre minorities)

25.0

25.1

0.4%

33.2

31.7

-4.5%

Group net profit

100.4

95.0

-5.4%

84.1

77.0

-8.4%

Net debt

7.6%

7.5%

-0.1%

8.7%

8.6%

-0.1%

EBITDA margin (%)

5.6%

5.4%

-0.2%

6.9%

6.7%

-0.1%

EBIT margin (%)

661.0

644.0

-2.6%

702.0

690.2

-1.7%

Source: La Doria data

The lower sales prices for new tomato contracts (negotiated in summer 2016 with validity from 2017), as well as for vegetables and pulses, led to a reduction in sales targets, although these were mostly reflected in the updated business plan forecasts in September 2016. The continuing stagnation of consumption in Europe caused the further slight reduction in sales forecasts illustrated above.

With c 50% of sales in the UK, La Doria has been affected by sterling weakness. In addition, there has been a loss of competitiveness in categories such as pulses and ready-made soups, where the competition has UK-based production and hence lower costs. This was reflected in the business plan update published in September 2016.

We compare our forecasts relative to group guidance in the financials section on page 9.

Strategy

La Doria has needed to formulate a strategy for growth against the background of a general deflationary environment in Europe. Within its product range it has witnessed declining consumption in some categories and increased raw material costs. As a consequence, there have been increasing competitive pressures.

To help achieve its financial targets, the company sets out its strategic guidelines annually with its updated business plan. The 2017 strategic guidelines are unchanged from those outlined in September 2016 and are as follows:

Further growth in international markets where La Doria is a current market leader, including the UK, Japan, Australia and Germany.

Achieve growth in markets where La Doria is currently under-represented (mainly the US), through new supply agreements.

Develop new markets, in particular emerging markets (China, South-East Asia and UAE). In 2012, La Doria joined Tradizione Italiana, a consortium of 12 leading Italian food companies, representing a wide range of specialities and food categories, to promote the quality of Italian food in emerging markets.

Develop the ready-made sauces business and continue to grow the acquired Pa.fi.al business. The growth of the ready-made sauces market ties in with the overarching objective of reducing the volatility of the business and improving visibility through the development of higher value-added, non-seasonal products, which are also margin enhancing.

Extend higher value-added product ranges, investing in the premium and organic/bio segments, which are higher margin.

Continue to improve efficiency through investment in new technology to reduce cost.

Assess acquisition opportunities to extend the range, in particular with the objective of reducing the group’s exposure to the volatile tomato line.

Tomato-based products

As illustrated in Exhibit 1, the red line (tomato-based products) contributed 22% of revenues in FY16 and is now of similar size to the vegetable line in terms of profit contribution. La Doria is the largest producer in Italy of peeled and chopped tomatoes and it is market leader in UK, German, Australian and Japanese private-label canned tomatoes.

Over the past few years, there have been a number of structural changes in the Italian tomato market that have been favourable to the company, as they have shifted the balance of supply and demand more in favour of the processors by attempting to stabilise the level of production in the market. These have had the effect of somewhat reducing the volatility of the business. Primarily, these factors are:

Legislative reform – the implementation of the European Fruit and Vegetable Reform took effect in 2011, meaning that agricultural farm subsidies are no longer linked specifically to the quantity of tomatoes grown. This led to a material reduction in Italian tomato production from 5.65m tonnes in 2009 to a nadir of 4.1m tonnes in 2013 (-27%). 2014 production bounced off the lows and stood at 4.9m tonnes, 2015 production increased again to 5.4m tonnes, and 2016 production was down slightly at 5.2m tonnes at the national level (although this was down 18% for the south of Italy specifically). Legislative reform has effectively reduced the supply/demand imbalance in Italian tomatoes. The CAP 2014-2020 provides subsidies for tomato growers, but these are for an insignificant monetary amount, and therefore the updated CAP has not affected the balance of production.

Sector consolidation – there has been a c 40% reduction in the number of companies operating in the Italian tomato industry over the last 10 years as the less efficient and smaller players have exited. This underlying long-term trend was accelerated by the financial crisis. It has resulted in a more stable and rational pricing environment among the remaining players, as well as market share gains, although there is still room for improvement here (see below).

These factors have resulted in an alignment of interests; all stakeholders in the value chain of the Italian tomato industry now have an interest in avoiding overproduction. In April 2014, a number of stakeholders created the cluster ‘district of the Central and Southern Italian industrial tomato’. This was set up to promote co-ordination among the different areas and to improve efficiency through better planning. By collaborating as a cohort, the industry should be better placed to match supply with demand, thus avoiding large-scale overproduction. Over the past few years, production has come in broadly in line with expectations and overproduction has become a less important issue.

In 2016 sales prices contracted despite an increase in raw material costs and the drop in tomato production discussed above. This was mainly caused by the fragmentation of the processed tomato sector, with a number of small businesses that at times make seemingly irrational choices. Over time, sector consolidation has helped mitigate the fragmentation issue, as discussed above, but some small players still remain.

On the demand side, there are a number of factors that have been improving La Doria’s outlook over time:

Private-label growth – this has been a trend across the consumer space, as the market becomes polarised between the leading brands and private label. The long-term trend of the secondary and tertiary brands being squeezed is set to continue. Specifically within the tomato-based products space, in FY16 private label overall lost a bit of share due to increased promotional activity by the brands (source: IRI InfoScan), and gained share in the UK (source: Kantar Worldpanel). Demand for tomato-based products was down 110bp in volume terms in Italy (source: IRI InfoScan). In contrast, however, in the UK demand for tomato-based products was up 490bp in volume terms (source: Kantar Worldpanel). In Italy La Doria now holds a 15% private label share (source: management estimates on IRI Infoscan data) and in the UK this is 39% (source: LDH management estimates using Kantar Worldpanel data). This compares with 18.9% and 38% respectively in 2016. Over the last few years La Doria has made progress in both markets, as in 2012 private label share was 12.4% in Italy and 36.5% in the UK.

Italian tomato demand – the demand for tomatoes specifically designated as Italian is increasing, with the export of Italian tomatoes growing by 15% in 2012-15, and 7.2% in the first 11 months of 2016 (source: ANICAV based on Federalimentare data). Approximately 80% of La Doria revenues are exported.

La Doria has a number of internal strategies to enhance profitability and reduce volatility:

Moving up the value chain – increasing exposure to higher-margin, value-added products such as ready-made sauces and organic lines. The Pa.fi.al acquisition fit perfectly within this strategy. This had the dual benefit of reducing exposure to the lower-value peeled tomato category and increasing underlying margins. In addition, it also reduced the seasonality of the business.

Best practice – management has consistently been driving through changes to improve procurement, fixed-cost efficiencies and volume leverage throughout the business.

2017 outlook

The annual tomato campaign runs from the end of July to the end of September. Typically, La Doria negotiates annual contracts with its customers, and hence prices, just before or during the processing season. This gives La Doria good visibility over the outlook for its profitability until Q3 of the following year, when the next pricing rounds occur. La Doria establishes both the volume and pricing of the contracts, so by the end of the processing campaign the total cost is broadly known.

As stated above, 2016 production stood at 5.2m tonnes, although in central/southern Italy specifically, volumes were down 18% due to adverse weather conditions.

It is still early days for the 2017 campaign, but the current forecast is for a 4% decline in total tomato production at national level, to c 5.0m tonnes. La Doria management expects the sector de-stocking, which occurred following the drop in production in southern Italy in 2016, to help sales prices for the 2017 campaign, and hence that there should be a recovery in the tomato-based red line from Q417. Our forecasts reflect this and anticipate some recovery in Q417.

Pulses and beans

As shown in Exhibit 1, the vegetable line (pulses and beans) represented 27% of revenues in FY16. La Doria is market leader in Italy and the UK in private-label preserved pulses. The 2015 season witnessed a reduction in raw material costs due to an improvement in crop yields, and hence 2016 pricing was down sharply. The 2016 season experienced a sharp increase in raw material costs following a poor crop yield, and it was difficult to pass on these increased costs given the fierce competition, which affected 2017 profitability. In Italy, La Doria held a 41% share of the canned vegetable private label market in 2016, up c 200bp over 2015 (source: management estimates based on IRI Infoscan). The Italian canned vegetable market witnessed growth during 2016 of 0.8% in both volume and value terms, ie pricing was flat (source: IRI InfoScan). The private-label subsegment, which is where La Doria mainly competes, also increased slightly, while branded share declined (source: IRI InfoScan). In the UK, La Doria’s key product in the category is private-label baked beans, where it holds a 51% market share, up c 100bp vs 2015 (source: LDH management estimates using Kantar Worldpanel data). In 2016, the overall baked beans market was down in both volume (-0.5%) and value (-1.6%) terms; however, private label share was stable (source: Kantar Worldpanel).

La Doria management is keen to expand the vegetable line. Although this division has suffered from competitive pressures recently – in the UK, in particular, due to Brexit-related effects, it offsets the more commoditised red line products and also has the advantage that production can occur throughout the year, rather than being concentrated in the three summer months of the tomato processing campaign. Expanding the vegetable line would therefore help improve group efficiency.

In H117 management expects a further fall in the sales price of canned pulses as the environment remains tough and competition is fierce. However, from H217 pricing may improve as the new crop season comes through.

The fruit line

The fruit line accounted for 12% of revenues in FY16 (Exhibit 1). La Doria is the market leader in Italian private-label fruit juices and fruit beverages, and has a number two position in the Italian market overall. However, the profitability of the fruit line is below that of other segments, as it has suffered through several years of underperformance during the recent period of economic difficulties. As for the other divisions, 2016 pricing was mainly driven by the 2015 crop. Significantly higher raw material costs were caused by drops in the production of apricots, peaches and nectarines in particular. These could not be passed on to customers due to the competitive environment – mainly caused by the market being dominated by farmers’ co-operatives, which are less driven by profitability concerns. The 2016 fruit crop, however, saw far greater stability in the cost of fresh fruit, and this is an important driver for 2017 contracts. In 2016, the Italian market declined by 6.9% in volume terms and 4.7% in value terms (source: IRI InfoScan). La Doria’s share of the Italian private label market was 35% in 2016 vs 29% in 2015 (source: management estimates on IRI InfoScan data). Private label continued to gain volume and value share of the total fruit juice market.

Sauces

The segment accounted for 13% of revenues in FY16 (Exhibit 1). La Doria is the market leader in Italy in private-label pasta sauce. During 2016 the domestic Italian market witnessed strong growth in terms of both value and volume. Tomato-based sauces were up 4% in volume terms and 4.4% in value terms, while pesto sauces were up 11.8% in volume and 11% in value terms (source: SymphonyIRI). Private label also grew and market share was stable. In the UK the ambient ready-made sauces market witnessed a decline in volumes (-3.2%) and value (-4.3%) (source: Kantar Worldpanel). Private label share expanded at the expense of the brands. In the pesto subcategory, the UK market was up an impressive 8.7% in volume terms, with private label share expanding significantly. La Doria’s market share in Italian private label sauces was 42% in 2016 vs 45% in 2015 (source: management estimates on IRI InfoScan data).

Other lines (Trading LDH)

La Doria owns 58.0% of its subsidiary LDH. For accounting purposes, it consolidates 100% of its minorities, and treats as debt the value of the put options that exist against it. LDH is the leader in the British market for private-label, tomato-based products, pulses, dry pasta and canned tuna. The ‘other’ category is mainly composed of LDH’s sales and accounted for 26% of group sales in FY16.

The remaining 42% stake in LDH is owned by a combination of Thai Union Group, Di Martino and management. LDH’s three major shareholders – La Doria, Thai Union Group and Di Martino – together supply the majority of its ranges across tomatoes, pulses, tuna and pasta.

During FY16 the ‘other’ line witnessed a small reduction in volumes and a significant drop in pricing, particularly for dried pasta, tuna and sweetcorn. The drop in sales was also caused by FX effects.

Valuation

La Doria’s recent share price performance has been positive. It has recovered significantly in the last three months and has outperformed relative to the FTSE MIB on a three-month and six-month basis. Despite this, on 2017 estimates La Doria trades at 13.8x P/E and 9.9x EV/EBITDA, with a 1.6% dividend yield. This is at a discount of c 30% on P/E and c 2.5% on EV/EBITDA to the average of our peer group of private-label and small-cap food manufacturers. A positive outcome of the 2017 campaign should provide a catalyst for the shares.

Exhibit 4: Benchmark valuation of La Doria relative to peers

P/E (x)

EV/EBITDA (x)

Dividend yield (%)

Market cap (m)

2017e

2018e

2017e

2018e

2017e

2018e

Greencore

£1,650.0

14.6

13.4

11.3

8.8

2.4%

2.6%

Ebro Foods

€ 3,220.4

17.4

16.6

9.9

9.3

3.2%

3.3%

Parmalat

€ 5,776.9

33.1

31.1

9.9

8.4

0.6%

0.6%

Bonduelle

€ 1,056.0

17.0

14.1

9.2

7.5

1.3%

1.5%

Valsoia

€ 174.0

19.5

17.4

10.5

9.1

1.5%

1.7%

Peer group average

20.3

18.5

10.2

8.6

1.8%

2.0%

La Doria

€334.5

13.8

10.9

9.9

8.1

1.6%

2.2%

Premium/(discount) to peer group

(32.1%)

(41.2%)

(2.6%)

(5.4%)

(12.5%)

14.0%

Source: Edison Investment Research estimates and Bloomberg consensus. Note: Prices as at 26 May 2017.

Our primary valuation methodology is a 10-year DCF analysis, and we calculate a fair value of €12.49, or 16% upside from the current level. This is based on our assumptions of a 1.0% terminal growth rate and a 9.0% terminal EBITDA margin. Our WACC of 6.0% is predicated on an equity risk premium of 4%, a borrowing spread of 5% and beta of 0.8. Below, we show a sensitivity analysis to these assumptions and note that the current share price is discounting a terminal EBITDA margin of 7% (which compares to La Doria’s already reported EBITDA margin of 8.6% in 2016) and a terminal growth rate of c 0.5%. We expect La Doria’s EBITDA margin to trough at 7.4% in 2017 in light of the tough competitive environment, and to subsequently recover (we forecast 8.5% in 2018). We also expect revenues to recover in 2018 if the campaigns are successful and currently forecast 6% revenue growth, followed by 3% growth in 2019 and a more conservative 1.5% growth thereafter.

Exhibit 5: DCF sensitivity (€/share) to terminal growth rate and EBITDA margin

EBITDA margin

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

Terminal growth

-2.0%

7.8

8.4

8.9

9.5

10.1

10.6

-1.0%

8.5

9.2

9.8

10.5

11.1

11.8

0.0%

9.5

10.2

11.0

11.7

12.5

13.2

1.0%

10.8

11.7

12.6

13.5

14.4

15.3

2.0%

12.7

13.8

14.9

16.0

17.2

18.3

3.0%

15.7

17.2

18.6

20.1

21.6

23.0

4.0%

21.3

23.4

25.5

27.6

29.7

31.8

Source: Edison Investment Research estimates

Sensitivities

La Doria’s key sensitivities include:

input cost inflation on the agricultural commodities it processes to manufacture its products;

the supply/demand balance affecting the achievability of finished goods price inflation;

consumer consumption patterns and competitive pressures, particularly in Europe with a subdued economic environment, although La Doria and PL in general tend to benefit from consumers trading down; and

FX, specifically euro/sterling due to the consolidation of its trading subsidiary, LDH. The UK represents c 50% of group sales.

Financials

Q117 results affected by FX

On 12 May, La Doria reported Q1 results in line with expectations. Consolidated revenue for the quarter of €167.5m was in line with the prior year (€168.3m). The main culprit for the sales stagnation was FX, as organic sales growth was +5.6%. This was exclusively driven by volume growth, as price deflation remained a feature.

We make no material changes to our forecasts, and we illustrate below our forecasts versus La Doria’s own targets for a range of metrics. Our forecasts are broadly in line with current targets. With current and forecast net debt/EBITDA below 2x, the balance sheet remains conservative. We expect the outcome of the 2017 campaigns to be known by the Q3 results (scheduled for September). Customer negotiations on the red line side will be almost complete, and good progress should be made in the vegetable, sauces, and fruit lines.

Exhibit 6: Edison forecasts vs company targets for key metrics

2017e

2018e

Target (€m)

Forecast (€m)

Difference (%)

Target (€m)

Forecast (€m)

Difference (%)

Revenue

644

643.3

-0.1%

690.2

681.9

-1.2%

EBITDA

48

47.7

-0.6%

59.2

58.1

-1.9%

EBIT

34.9

34.7

-0.5%

46.4

45.6

-1.7%

PBT

33.1

32.7

-1.1%

43

42.1

-2.1%

Net profit

25.1

24.2

-3.5%

31.7

30.7

-3.1%

Net debt

95

95.1

0.1%

77

79.6

3.4%

Source: La Doria, Edison Investment Research estimates

Exhibit 7: Financial summary

€m

2014

2015

2016

2017e

2018e

2019e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

631.4

748.3

653.1

643.3

681.9

702.4

Cost of Sales

(527.6)

(616.9)

(545.4)

(545.5)

(571.5)

(581.6)

Gross Profit

103.8

131.5

107.8

97.8

110.5

120.8

EBITDA

 

 

60.0

77.6

56.3

47.7

58.1

67.6

Operating Profit (before amort. and except.)

48.1

61.0

39.9

34.7

45.6

55.1

Intangible Amortisation

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

FX Gain / (loss)

0.3

3.6

8.9

0.0

0.0

0.0

Operating Profit

48.4

64.6

48.8

34.7

45.6

55.1

Net Interest

(4.1)

(3.6)

(2.7)

(2.0)

(3.5)

(3.5)

Profit Before Tax (norm)

 

 

44.0

57.4

37.3

32.7

42.1

51.6

Profit Before Tax (FRS 3)

 

 

44.3

61.0

46.2

32.7

42.1

51.6

Tax

(14.3)

(16.1)

(12.4)

(8.5)

(11.4)

(13.9)

Profit After Tax (norm)

29.9

44.8

33.7

24.2

30.7

37.6

Profit After Tax (FRS 3)

29.9

44.8

33.7

24.2

30.7

37.6

Average Number of Shares Outstanding (m)

30.6

31.0

31.0

31.0

31.0

31.0

EPS - normalised fully diluted (c)

 

 

80.5

144.6

108.8

78.1

99.1

121.4

EPS - (IFRS) (c)

 

 

81.5

144.6

108.8

78.1

99.1

121.4

Dividend per share (c)

22.0

28.0

18.0

17.0

24.0

24.0

Gross Margin (%)

16.4

17.6

16.5

15.2

16.2

17.2

EBITDA Margin (%)

9.5

10.4

8.6

7.4

8.5

9.6

Operating Margin (before GW and except.) (%)

7.6

8.1

6.1

5.4

6.7

7.8

BALANCE SHEET

Fixed Assets

 

 

179.6

177.6

173.3

170.8

170.8

170.8

Intangible Assets

10.6

10.6

10.0

9.3

8.6

7.9

Tangible Assets

146.6

143.3

143.9

142.1

142.8

143.5

Investments

22.3

23.7

19.4

19.4

19.4

19.4

Current Assets

 

 

374.0

398.8

367.8

381.7

414.9

445.0

Stocks

212.9

199.8

187.0

185.5

197.2

200.6

Debtors

100.3

107.7

103.9

99.7

105.7

108.9

Cash

41.1

77.9

62.8

82.4

97.9

121.3

Other

19.6

13.3

14.2

14.2

14.2

14.2

Current Liabilities

 

 

(229.1)

(220.7)

(187.9)

(179.2)

(189.3)

(191.1)

Creditors

(143.7)

(129.3)

(126.4)

(117.7)

(127.8)

(129.6)

Short term borrowings

(85.4)

(91.4)

(61.5)

(61.5)

(61.5)

(61.5)

Long Term Liabilities

 

 

(136.6)

(157.3)

(144.5)

(140.4)

(132.8)

(132.8)

Long term borrowings

(93.9)

(116.6)

(106.1)

(116.0)

(116.0)

(116.0)

Other long term liabilities

(42.6)

(40.7)

(38.3)

(24.4)

(16.8)

(16.8)

Net Assets

 

 

187.9

198.4

208.8

233.0

263.7

291.9

CASH FLOW

Operating Cash Flow

 

 

53.7

58.2

65.7

36.2

39.2

48.8

Net Interest

(4.1)

(3.6)

(2.7)

(2.0)

(3.5)

(3.5)

Tax

0.0

0.0

0.0

0.0

0.0

0.0

Capex

(17.2)

(8.4)

(13.0)

(10.5)

(12.5)

(12.5)

Acquisitions/disposals

(64.8)

(4.9)

0.0

0.0

0.0

0.0

Financing

0.0

0.0

0.0

0.0

0.0

0.0

Dividends

(6.3)

(9.3)

(8.4)

(6.1)

(7.7)

(9.4)

Other

8.6

(23.3)

(16.3)

(8.0)

0.0

0.0

Net Cash Flow

(30.2)

8.7

25.3

9.6

15.5

23.4

Opening net debt/(cash)

 

 

108.5

138.2

130.1

104.8

95.1

79.6

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.5

(0.6)

(0.1)

0.1

0.0

0.0

Closing net debt/(cash)

 

 

138.2

130.1

104.8

95.1

79.6

56.2

Source: La Doria accounts, Edison Investment Research

Contact details

Revenue by geography

Via Nazionale 320
84012 Angri
Italy
+39 081 516611
www.gruppoladoria.com

Contact details

Via Nazionale 320
84012 Angri
Italy
+39 081 516611
www.gruppoladoria.com

Revenue by geography

Management team

CEO: Antonio Ferraioli

CFO: Alberto Festa

Antonio Ferraioli joined the company in 1974. He has been CEO since 1984 and is a member of the founding Ferraioli family.

Alberto Festa joined the company in 2007, having held various positions in a number of Italian consumer products companies.

Management team

CEO: Antonio Ferraioli

Antonio Ferraioli joined the company in 1974. He has been CEO since 1984 and is a member of the founding Ferraioli family.

CFO: Alberto Festa

Alberto Festa joined the company in 2007, having held various positions in a number of Italian consumer products companies.

Principal shareholders

(%)

Antonio Ferraioli

10.17

Andrea Ferraioli

9.54

Rosa Ferraioli

8.66

Iolanda Ferraioli

8.66

Giovanna Ferraioli

8.66

Raffaella Ferraioli

8.66

Teresa Maria Ferraioli

8.66

Companies named in this report

Greencore (GNC.LN), Ebro Foods (EBRO.SM), Parmalat (PLT.IM), Bonduelle (Bon.EN), Valsoia (VLS.IM)

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by La Doria and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by La Doria and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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